Food scares, market power and price transmission: the UK BSE crisis

This paper is concerned with the impact of food scares, principallythe BSE crisis in the UK, and focuses on price transmissionin vertically related markets. We show that if market powerhas an effect on the farm–retail margin, this determinesthe specification of the cointegrating relationship and thusprovides a test of market power. The results for the UK beefchain suggest that we cannot reject the importance of marketpower. The impact of the BSE crisis on farm prices is foundto be more than double that on retail prices, thus corroboratingpublic concerns regarding a differential impact of food scareson retailers and producers.